Extend Tax Credit Please…

Should the First Time Home Buyer tax credit be extended?
We love the $8,000 first-time homebuyer (“FTH”) tax credit! We’ve deemed this credit “the stimulus that actually stimulates!” because it made our mortgage firm phone ring with buyers wanting to take advantage of it, unlike the other dozen stimulus measures that have had no obvious, direct results on the consumers we work with.
If you’ve been underneath a real estate-free rock for the first half of the year, let us brief you on the details of this program. Folks who (a) haven’t owned a home for the past three years, (b) earn a “modified adjusted gross income” (don’t even ask — check with your tax pro) of $75,000 or less for singles/$150,000 or less for married filing jointly, and who (c) close escrow on a home purchase no later than Nov. 30, 2009, can qualify for the tax credit. Why, you might ask, does this particular tax work so well? Mostly in the ways that it is different from previous credits: It doesn’t have to be paid back (like its Bush-era predecessor), it is accessible immediately (buyers can actually file an amended 2008 return right after closing to get their dough), and it is fully refundable — eligible FTHs can actually walk away with a check from the IRS for $8,000, rather than the credit working only to offset tax liability.
The FTH tax credit question I’ve been asked increasingly over the last few weeks has nothing to do with the pros and cons of the credit itself, but rather, with its duration. Inquiring minds (buyers, sellers and Realtors alike) all want to know: Will the $8,000 FTH tax credit be extended another year? There are really two intertwined questions latent in the issue: 1) Should the tax credit be extended? and 2) Is an extension likely?
There are scores of arguments in favor of extending the program — well, for those who agree that the goal should be to stimulate home buying. (If you think this goal is way off-base, which, believe it or not, some folks do, feel free to stop reading now.) Some might argue the tax credit should be extended for another year (or even more) or broadened to encompass move-up buyers (not just first-timers) because it has been effective: The combo meal of low home prices plus the FTH credit has definitely driven buyers off the fence and into the market in the first quarter of 2009, especially in the areas hardest hit by the foreclosure crisis.
But, even though it wasn’t broke, the Department of Housing and Urban Development went right on ahead and fixed the FTH tax credit — or announced its intention to fix it anyway — a couple of months ago when it announced a plan to allow buyers using FHA loans to monetize the credit upfront, to be applied toward down payment in excess of the 3.5 percent minimum or toward closing costs. The catch, if you want to call it that, is that the upfront monetization logistics haven’t yet been completely worked out, so by the time the FTH tax credit becomes available for upfront use, it will be available for only five months, perhaps less, if the current deadline for the program remains in place. Just when the program gets turbocharged, if the Dec. 1 expiration is not extended, it will go away.
While we’ve seen more and more activity in the market lately, and things appear to be looking up, there are lots of reasons why we still need and could really use the FTH tax credit going forward another year or more. While actual foreclosures seem to be slowing down, this might be an artifact of the various moratoria that were imposed during the first half of the year — we’ll see what happens during the rest of the year. Also, the adjustable-rate-mortgage reset numbers peaked last year, but there are still many hundreds of thousands scheduled to reset this year and next.
Should the FTH tax credit be extended?
Yes, please! If you are in the market to refinance or purchase, we offer the lowest rate and fee combination.